" A high degree of monetary policy accommodation remains appropriate," Ms Yellen said yesterday in semi-annual testimony prepared for delivery to the Senate Banking Committee. " Although the economy continues to improve, the recovery is not yet complete."

Ms Yellen cited labour-market weaknesses even after an unexpectedly fast decline in unemployment put pressure on Fed officials to consider accelerating their timetable for an interest-rate increase.

She said yesterday that rates are likely to stay low for a " considerable period" after bond purchases end, which she said could happen following the Fed' s October meeting

 

URA data yesterday shows developer sales of private condos plunging 68 per cent to 482 in June from a month earlier.

Though fewer launches (418 units) in the traditional lull season of school holidays and the World Cup are to be blamed, consultants do not expect sales to jump when developers ramp up condo launches.

PropNex CEO Mohd Ismail warned that the " air of caution" is expected to linger, with monthly sales in the second half expected to be around 600-800 units.

This would mean that the estimated 2014 sales of 9,000-10,000 units are 35 per cent shy of the units sold in 2013, he projected.

There are fewer " affordably priced mass-market projects" in the pipeline, said Chia Siew Chuin, director of research and advisory at Colliers International. " Furthermore, the slowdown in buying momentum - even for popular projects - indicates that buyers continue to face inertia to commit."

Developers were more focused on moving units at existing projects rather than launching new projects in the traditionally slow month. Favourable pricing perceptions enabled certain projects to still garner interest after the initial launch.

City Developments' Coco Palms in Pasir Ris, launched in May, sold 55 units at a median price of $1,014 per square foot (psf) in June. The Panorama in Ang Mo Kio managed to move 49 units at a median price of $1,287 psf. It had sold 100 units in its re-launch in May at a median $1,241 psf after developer Wheelock Properties cut prices by some 10 per cent.

Another top seller in June was The Skywoods at Dairy Farm Heights, where 19 units were sold at a median $1,235 psf. The project - developed by TA Corporation, Hock Lian Seng Holdings, King Wan Corporation and Far East Distillers under Bukit Timah Green Development - managed to move only 82 units from its launch in September to May.

The developers managed to revive interest in The Skywoods after offering some " star-buys" with 3 per cent discount from preview prices and raising the commission for agents, according to sources.

Only two new projects were launched last month - Wing Tai-led The Crest in Prince Charles Crescent with 469 units and Roxy-Pacific' s 222-unit Trilive freehold condo in Kovan. Both projects had a slow start, with 35 units at The Crest sold at a median $1,682 psf and 19 units at Trilive sold at a median 1,605 psf.

Other projects launched in May such as Kallang Riverside and Waterfront @ Faber saw buying interest cooling off, with only six units and 16 units sold respectively in June.

Ong Teck Hui, JLL national research director, said: " The fundamental weakness in demand due to the TDSR and other cooling measures prevents any market pick-up from being sustained. After TDSR, there is just not enough demand to continually soak up unsold units, so we are seeing sales progress slowing significantly or even stalling completely after initial launch."

More than half of private condos sold in June were in the suburban areas (269 units), while city fringe areas accounted for 35 per cent (167 units) and core central region made up 10 per cent (46 units). URA' s data also showed that 49 executive condos (ECs) were sold by developers, down from 59 in May.

In the first half, 4,523 private condos (excluding ECs) were sold - 11 per cent fewer than in H2 of 2013, based on the latest data. This is a 56 per cent dive from about 10,182 units sold in the year ago period, which essentially means that sales by developers have more than halved since the TDSR kicked in in June last year.

Nicholas Mak, SLP International executive director, said: " As the government is not expected to ease any of the cooling measures and TDSR in 2014, and the local economy is growing at a very moderate pace, there is a growing possibility that the total number of private homes sold by developers in 2014 may fall under 11,000 units. If this happens, it would be the lowest volume since the financial crisis of 2008, when developers sold only 4,264 private homes in that year."

Alice Tan, research head at Knight Frank, said she expects third-quarter new sales volume to reach 2,500-3,000 units, " fuelled by the gradual return in interest for a few highly-anticipated mid to large-scale projects such as The Highline Residences and City Gate" . " Developers are also likely to launch projects with attractive offers to boost sales performance in the coming quarter."

Mr Ismail noted that prices could come under pressure as the potential pool of buyers shrinks and developers face greater competition, exacerbated by a sizeable residential supply coming on-stream.

[SINGAPORE] Asian currencies fell back against the US dollar yesterday after a strong run as some players squared positions ahead of Federal Reserve chair Janet Yellen' s congressional testimony on monetary policy.

The weakness in Asian currencies was in contrast to the firm tone in some regional equity markets, which suggested there was no broad retreat from risky assets. Shares in South Korea and Indonesia pushed higher, while their currencies fell.

" The only thing I can imagine is that people are squaring up," said Mirza Baig, head of foreign exchange and interest rate strategy in Asia for BNP Paribas in Singapore.

Most emerging Asian currencies have risen this year as investors reacted to easy monetary policies by major deveoped world central banks by seeking higher returns in the area.

 

WALL Street may have recorded a triple-digit gain on Monday but there was virtually no impact here yesterday.

The Straits Times Index (STI), which for many days had depended on United Overseas Bank (UOB) for support, closed virtually unchanged at 3,291.42, with UOB weakening 10 cents at $23.84.

Turnover remained depressed at 1.4 billion units worth $916 million the broad market excluding warrants ended with 198 rises against 222 falls.

If UOB has been instrumental in the STI' s fortunes, then, oddly enough, the Dow' s Monday jump came about because of better-than-expected earnings reported by another bank - Citibank.

 

DEVELOPERS' sale of private condos plunged 68 per cent from a month ago to 482 units in June, a quiet month where only 418 units were launched.

This is significantly lower than the sales figures in May, when developers launched 1,819 units and sold 1,488 units.

There were another 49 executive condo units sold by developers in June, down from 59 in May.

More than half of the units sold in June were located in the suburban areas

 

This means a range of between 3,150 points and 3,400 points in the second half of the year.

" Be bullish when the STI declines towards 3,150 in Q3, and lock in gains when the index rises closer to 3,400 by end-Q4," DBS said.

 

This could be due to more buyers moving into the resale market as owners relent to lower prices to match the expectations of buyers, property consultants say.

Transaction data from Singapore Real Estate Exchange (SRX) shows that prices fell 1.4 per cent from May, dragged by declines across all regions.

But the number of resale transactions increased by 7.9 per cent month-on-month to 452 in June. This is, however, 23.8 per cent lower than the number of resale transactions inked in June last year.

" June' s increase in resale deals cannot be construed as buoyant sales activity as total monthly resale deals is still fairly limited. Some deals moved in June as owners finally relented to lower prices offered by buyers, after the property was up for sale prior to June for a while but could not find a buyer who is willing to pay near the asking price," said Ong Kah Seng, director at R' ST Research.

The resale market was also quiet due to the June holidays and the World Cup period, he added.

The Rest of Central Region (RCR) marked the biggest price decline of 3.2 per cent, followed by 1.7 per cent in Core Central Region (CCR) and 0.3 per cent in Outside Central Region (OCR).

ERA Realty key executive officer Eugene Lim noted that the price declines in RCR and CCR, where homes fall in a higher price band, steered the prices down.

Resale prices in the CCR are also affected by loan curbs, ample unsold developer stock, additional buyers stamp duty and weak leasing demand.

But he reckoned that as prices stabilise, more buyers may be moving back to the resale market.

In the rental market, condo owners were more willing to lower their asking rents to secure tenants.

According to SRX, overall rental prices in June dipped  0.8 per cent from May, and fell 6.5 per cent from a peak in January last year. This is based on an estimated 3,151 units rented in June.

This estimated number of rental transactions is a 2.2 per cent increase from the 3,084 rental contracts inked in May, and 18.6 per cent higher than the 2,657 rental contracts signed in June last year.

Mr Lim noted that the completion of private condos will rise from 13,150 units last year to an estimated 17,138 units this year. This is expected to rise further to 21,738 units in 2015 and 26,252 units in 2016.

More condo units entering the resale market and the tightening of foreign manpower will probably keep rents depressed going forward, he said.

 

' It' s clear that services growth is not so strong and in the next two quarters it may even be weaker.'
- UOB' s Francis Tan

And while hopes for a better second half are still alive, analysts say this is highly contingent on the state of Singapore' s manufacturing sector. Most full-year GDP growth forecasts now hover around the 3.5 per cent mark, below 2013' s 3.9 per cent expansion.

The economy performed worse than the market had expected in Q2, expanding 2.1 per cent compared to a year ago, according to advance GDP estimates released by the Ministry of Trade and Industry (MTI) yesterday morning.

The poorer-than-anticipated performance - caused by a broad-based slowdown in both manufacturing and services - caught analysts off-guard. In fact, all but one of the 23 private-sector economists polled by Bloomberg (prior to the data release) had expected Q2 GDP growth to be higher than 2.1 per cent.

On a seasonally adjusted quarter-on-quarter annualised basis, MTI said overall GDP contracted 0.8 per cent - a reversal from the annualised 1.6 per cent growth in the preceding quarter. The market had been expecting quarter-on-quarter growth of 2.4 per cent.

Expansion in the manufacturing sector moderated sharply to 0.2 per cent year-on-year, down from 9.9 per cent in Q1. MTI said the deceleration in growth was largely due to a contraction in electronics output and slower growth in transport engineering output.

While manufacturing was mostly to blame for the Q2' s weak performance, there was also a slowdown in the services sector. Growth there eased to 2.8 per cent on a year-on-year basis, lower than the 3.9 per cent growth in Q1. This was largely due to slower expansion in the wholesale & retail trade and transportation & storage sectors.

The second quarter' s shabby showing prompted at least five economists to downgrade their 2014 GDP forecasts. Those from Capital Economics and UOB lowered theirs to 3.5 per cent (the same as ANZ and Credit Suisse' s estimates), from 4 per cent and 4.2 per cent, respectively.

But CIMB, Citi, and OCBC economists - who have all trimmed their full-year forecasts - think growth this year could come even lower than 3.5 per cent. CIMB is looking at a range of 2.5 per cent to 3.5 per cent (down from 3.8 per cent), while Citi and OCBC are anticipating 3.1 per cent and 3.3 per cent respectively (both down from 3.5 per cent).

Said UOB' s Francis Tan of the downgrades: " I think (economists) were waiting to see how badly the electronics contraction would affect the overall economy in Q2, and also how much (growth in) the services sector would moderate ... The new figures have given us a good indication - it' s clear that services growth is not so strong and in the next two quarters it may even be weaker."

Even though economists from ANZ and Mizuho expect firmer services growth going forward, DBS' s Irvin Seah says there is a risk that the sector may continue to decelerate in the coming quarters, given the continued labour crunch and rising business costs. Barclays' s Leong Wai Ho also believes the services industry will continue to cool, on the back of a subdued property market and a marked slowdown in tourism inflows.

Still, some economists remain optimistic on Singapore' s economic outlook for the second half of this year, and caution against getting too bogged down with the latest dismal data. Said Mizuho economist Vishnu Varathan: " While Q2 GDP is mostly about manufacturing ' catch-down' , one ought not to be caught up with this. Instead, the silver lining is that growth has probably bottomed. We see scope for full-year growth to catch up towards - but shy of - 4 per cent."

Both he and OCBC' s Selena Ling say the pertinent question to ask for H2 2014 is whether manufacturing will continue to pull down the Republic' s overall growth.

Said Ms Ling: " The critical determining factor for a potential technical recession in Q3 will be if the manufacturing sector bounces back from its subpar performance in Q2 or remains stagnant at Q2 output levels, albeit the latter remains a less likely scenario to us for now."

Even with Q2' s disappointing figures, economists say no change in monetary policy is expected. But Citi' s Kit Wei Zheng warned: " Should growth expectations persistently disappoint in H2 2014 or 2015, we would watch for potential knock- on effects on the jobs market and core inflation as a signpost for any shift in policy bias."

MTI will release updated GDP estimates for the second quarter in August, including performance by sectors, sources of growth, inflation, employment and productivity, in its Economic Survey of Singapore

 

THE World Cup may be over but another kind of fever is heating up in Singapore as companies enter the earnings season.

Starting this week until end-August, a slew of companies are expected to report their latest quarterly earnings, with more than 55 firms already having indicated their results release date, according to data from ShareInvestor.

Ornamental fish supplier Qian Hu started the ball rolling, announcing yesterday its second quarter results for financial year ending 2014.

Today, companies revealing their financial performances include Anwell Technologies, First Reit and Singapore Press Holdings.

 

Monday' s flurry of mergers and acquisitions activity in the healthcare sector gave investors some confirmation that the US stock market is still attractive. Shire Plc, which develops and sells drugs to treat rare diseases, succumbed to an increased takeover offer of 31 billion pounds (US$53 billion) from AbbVie Inc on Monday.

US-listed shares of Shire rose 2.1 percent to US$254.27 while AbbVie shares slipped 0.2 per cent to US$54.85.

Generic drugmaker Mylan Inc said it would buy Abbott Laboratories' specialty and branded generics business outside the United States in an all-stock transaction valued at about US$5.3 billion. Mylan shares advanced 2.1 per cent to US$51.24 while Abbott shares rose 1.3 per cent to US$41.82.

 

LATELY, if United Overseas Bank (UOB) performs then the Straits Times Index performs but if UOB weakens, so does the index.

The former was the case last Friday when UOB' s 83-cent surge to $24.03 contributed about half the index' s 24-point rise the latter was the case yesterday, when UOB' s nine-cent fall to $23.94 accounted for 1.3 out of the STI' s eventual 2.75 loss at 3,290.98.

In keeping with how trading has been for several months now, volume was a poor 1.2 billion units worth $778.2 million, for an average of 65 cents per unit. Excluding warrants, there were 207 rises versus 208 falls.

UOB' s movements over the past few weeks have provided most of the daily drive for the STI. The bank was queried by Singapore Exchange last Friday on possible reasons for the interest in its shares. SGX issued a " trade with caution" advice for the stock after the bank said it did not know why its shares were in play.